Analysts are still too optimistic in their earnings estimates, says National Bank Financial in a research note.

“Investors have been hit by a cold dose of reality lately. North American equities have pulled back to near their mid-August trough. In the U.S., that means the major indices have lost ground so far this year,” it notes. “Despite the bad news of recent weeks, the analysts’ consensus forecast still expects double-digit profit growth next year.”

NBF says that while analysts’ estimates are fairly precise during periods of strong profit growth, when the economy begins to slow or to go into recession, analysts tend to over-estimate earnings.

At 15.7% of corporate GDP, U.S. pre-tax profit margins are currently at a 40-year high, it says, adding that every past economic downturn has lead to lower profit margins.

“Historically, when an inverted yield curve suddenly steepens to a differential of more than 100 basis points (as it did recently), profits fall on average by 14.25% during the following year,” it reports.

“In stark contrast to the analysts’ double-digit earnings growth consensus expectation for the S&P 500 during 2008, we foresee a 14% decline,” NBF concludes.